Stolen Records at Heart of New Medi-Cal Scam / Much of the fraud occurred in L.A.

Amy Pyle, Los Angeles Times

Published 4:00 am, Thursday, December 30, 1999

1999-12-30 04:00:00 PDT Sacramento -- Another multimillion-dollar Medi-Cal scam based in Southern California has been uncovered, this one involving stolen doctor and patient records, state Attorney General Bill Lockyer announced yesterday.

The newest revelations to shake the troubled California medical program for the poor are apparently unrelated to the federal-state probe of false billings for medical supplies, which FBI officials estimate may eventually cost taxpayers more than $1 billion when it is finally unraveled. That giant rip-off of the California Medi-Cal system, centered in Armenian immigrant neighborhoods of Los Angeles, is one of the largest frauds against a state in American history, federal investigators said.

This time, in a sophisticated scheme that Lockyer's state investigators first suspected in July but are only now beginning to fully grasp, information from medical records is believed to have been stolen from hospital and clinic files. In some cases, hospital and even government employees are suspected of taking bribes to provide patient lists to the fraud ring, investigators said.

The information was used to set up phony medical operations of ghost doctors and phantom patients. In one case, the criminals even used a cardboard computer to make an office look real, Lockyer said.

Those fake doctors' offices then billed Medi-Cal for services never rendered that Lockyer would only estimate in the "millions of dollars."

"It's a continuing investigation," he said. "When you get deeper into it, it appears to get larger and larger."

So far, at least 20 doctors' names have been confirmed stolen by what is thought to be a tight-knit crime ring, and "we've only scratched the surface," said Collin Wong, the new director of Lockyer's Bureau of Medi-Cal Fraud and Elder Abuse. Wong declined to otherwise characterize the ring's members, saying he did not want to harm the investigation.

Typically, the attorney general waits to disclose details of investigations until after it has issued indictments -- an action that in this case may still be weeks or even months away.

But Wong said the office decided to warn hospitals and doctors yesterday because it has so far been unable to halt the operation completely and did not want to risk losing "millions of dollars more."

Lockyer and Gov. Gray Davis have been pursuing Medi-Cal crimes amid criticism that their predecessors ignored the abuses.

State Controller Kathleen Connell's office reported yesterday that her auditors had first uncovered examples of similar schemes in 1997, but no action was taken until after the new administration took office last January.

Much of the fraud has been centered in Southern California, Wong said, and another state official confirmed that most of it has occurred in Los Angeles. Wong said there appear to be no links to the earlier fraud revealed in November, which involved dozens of fake medical equipment companies stealing Medi-Cal funds by taking payment for crutches, adult diapers and other medical items that were never delivered to patients.

California receives about $9 billion annually in federal Medicaid money, which is matched in California by about $9 billion, benefiting 5 million poor and disabled Medi-Cal patients. The U.S. General Accounting Office estimates that nationwide about 10 percent of that money -- $1.8 billion in California -- is lost to fraud.